South Africa racing industry unhappy with new tax

Media reports from South Africa indicate that the horseracing industry has now digested Finance Minister Pravin Gordhan’s new tax proposals….and does not like the implications.
In his budget speech last Friday the Minister announced a new tax of 15 percent on all gambling winnings over Rands 25 000 (weekend reports suggest that the Minister had originally proposed a threshold of Rands 50 000).
Bookies and operators alike have reacted by pointing out that gamblers may experience many losses before hitting a significant win, but Finance ministry spokesmen contend the new tax is in line with that imposed in other countries such as the United States, and was intended to discourage excessive gambling.
The major difference in South Africa is that gamblers cannot claim wagering losses against wins in the same way as their American counterparts.
Treasury official Cecil Morden told the Sunday Times this week: “I don’t think we want to go that way.”
Bookmakers already deduct 6 percent of their clients’ winnings in separate provincial taxes, and Rian du Plessis, chief executive of Phumelela, which operates and controls horse racing in seven SA provinces, said: “We will seek an urgent meeting with the minister to explain that he would be destroying the fourth-largest sport in the country, along with thousands of jobs.”
The sport was already “in decline” in South Africa, with operator profits down, the racing chief declared.
One high roller professional punter told the newspaper that he would stop his average annual spend of Rands 3-million on the tote if the tax were implemented. “The government perceives anyone in racing to have money, and this is a straight wealth tax … (it) will annihilate the sport,” he claimed.
“A punter who loses Rands 5000 on the first nine races is down Rands 45000, and when he wins R25000 on the last race, he’ll be expected to hand over 15 percent of his winnings, irrespective of the previous losses.”
Lisa Haines, a director of the country’s largest sports betting outlet, SportsBet, told the newspaper that 20 percent of her client base – representing over 1000 gamblers – would have at least one win of over R25000 every month .
“It’s ridiculous. This is now a third tax on bets after VAT and the 6 percent gambling tax we’ve had to pay to the province for the past three years, she said.”
One of the complaints regarding the new tax measure is that there was insufficient consultative engagement with the gambling industry. Derek Auret, chief executive of the Casino Association of SA, said: “When the minister mooted the idea last year, we immediately sent a letter expressing our input and concerns, but we heard nothing more about it until the announcement.”
South Africa casinos, which employ about 30000 people, were already heavily taxed, he revealed: “The government already gets 37 percent of revenues generated by casinos.”
The bright side of the issue is that Treasury appears to be prepared to open dialogue on the tax, albeit belatedly.
Morden told the newspaper: “It’s difficult to consult on something entirely new. Obviously, we will do quite a lot of consultation now, looking at administrative implications and exploring all options.”  He added that in constructing the tax, the Ministry has looked at gaming taxes in the Netherlands, the US and India, in particular.

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